There are many rules of expiry of Call and Put in different market. Here is rule of Expiry of Call and put in NSE and BSE of Indian Stock Exchange. When you buy a “Call” then it is understood that you are bullish on any particular stock or Index. When you buy a “Put” then it is understood that you are bearish on any particular stock or Index.
So we take an example for buyer of Call and Put. Suppose that Mr. A. K. is very bullish on Monty Ltd. . The current price stock of Monty Ltd. is Rs. 100 in cash market. Mr. A. K. expects that Monty ltd. should be Rs. 120 in next month. Here he is bullish on Monty Ltd. He wants buy a call of Monty Ltd. of next month of strike price Rs. 120. The current price of Monty ltd is Rs. 100 in cash but any body may buy “Call” or “Put” of any price what he expects . So this is called strike price on which rate you want buy the call or put. So here Rs. 120 is strike price of call of Monty Ltd. The rate of strike price -120 of “Call” of Monty Ltd. for next month is Rs. 25/- . So Mr. A. K. bought one lot of Monty Ltd.’s call of strike price 120 in Rs. 25. The lot size of Monty Ltd. is 100. So Mr. A. K. has to paid Rs. 2500 (Lot size * rate of Strike price 120 call i.e. 100*25) for buy a call of Monty Ltd. for strike price 120. On any time (before expiry date of call or same day) he can sell that call. The rate in cash market of Monty Ltd. has grown to 115 next days. Then Mr. A. K. looks on call of Monty Ltd. (strike price 120). It has grown to Rs. 45. Here he wants book his profit. So he sold his call of Monty Ltd. of strike price 120. He booked his profit for Rs. 20 (Rs. 45 – Rs. 25) per share. Its mean he earned total Rs. 2,000 (20 * 100, where 20 is earring price on per share and 100 is lot size of call contract).
Here Mr. A. K. has sold the call before the expiry. But Mr. B.K. who bought the same call contract on same price (Monty Ltd. Call of Strike Price 120 for Rs. 25) does not sell his contract. Then expiry date of that call contract is 27.08.2009 (Last Thursday of Month). The rate of Monty Ltd.’s call of strike price 120 has been closed on 55 on expiry date. Then Mr. B.K.’s earning will Rs. 3,000 (30 * 100, where 30 is income on per share of call and 100 is lot size of call contract of Monty Ltd.).
The same condition is applied for “Put” Contract.